Financial Tips

Financial Tips

Financial Tips

Test Your Knowledge of New 529 Plan Rules(Updated: 02/02/2018)

True or false? 529 plans can now be used to pay for tuition at elementary or secondary schools.

Answer: True

The Tax Cuts and Jobs Act of 2017, which went into effect on January 1, 2018, expanded the definition of a “qualified higher education expense” to include tuition for K–12 schools. This means withdrawals to pay for a child’s private school will be federally tax free, up to a maximum of $10,000 per beneficiary, per year.

Before you start taking advantage of this change to the 529 plan structure, however, check with your state and your plan. Savingforcollege.com reports that as many as 30 states have not yet changed their own laws to comply with the federal law, which means you could face an unexpected tax bill if you withdraw 529 plan funds to pay for K–12 tuition.

We understand that it can be tricky navigating the world of personal finance. Everyone seems to have an opinion, and it can be hard to know what to believe. We created this series as a way to present and debunk some of the most common financial myths.

Fiction: Your beneficiaries won't have to pay income tax on the death benefits they receive from your life insurance policy.

Fact: Beneficiaries generally do not have to pay income tax on death benefits, with one exception. If the policy was transferred from one owner to another, it can trigger the transfer-for-value rule, which could negate the policy's tax-exempt status. This usually happens when a policy is transferred between stockholders to fund a buy-sell agreement.

This communication is strictly intended for individuals residing in the states of AZ, CA, CO, FL, KY, NM, NY, OK, TN, TX, UT. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services. Investments are not FDIC- or NCUA-insured, are not guaranteed by a bank/financial institution, and are subject to risks, including possible loss of the principal invested. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency.